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SAIC Motor Alert Deutsche Bank Markets Research Rating Company Date 14 November 2016 Buy SAIC Motor Alert Breaking News Asia China Reuters Bloomberg Exchange Ticker Price at 11 Nov 2016 (CNY) 23.96 Automobiles & 600104.SS 600104 CH SHH 600104 Price target - 12mth (CNY) 25.25 Components 52-week range (CNY) 24.12 - 17.89 Shanghai Composite 3,196 Further expansion into premium car Vincent Ha, CFA Fei Sun, CFA Research Analyst Research Analyst business (+852 ) 2203 6247 (+852 ) 2203 6130 Plans to import and produce Audi vehicles in future [email protected] [email protected] SAIC Motor announced today that the company has signed a memorandum of understanding (MOU) with Volkswagen AG (VOWG.DE, EUR128.7, Hold) on 11 Stock data November, regarding the establishment of Audi brand import and production business in China through the existing SAIC Volkswagen JV. In brief, the Market cap (CNYm) 264,173 further cooperation between SAIC Motor and Volkswagen will include 1) the Market cap (USDm) 38,765 production and sales of Audi brand products, 2) sales of imported Audi Shares outstanding (m) 11,025.6 vehicles, and 3) the possibility of providing new energy vehicles and intelligent Major shareholders SAIC Group internet mobile service to Chinese customers. (74.3%) Deutsche Bank view – a long-term positive but limited immediate impact Free float (%) 18 Undoubtedly, we think that the inclusion of Audi import and production in Avg daily value traded 51.6 SAIC Motor’s business will help to further enrich the company’s production (USDm) portfolio, especially in the premium segment. That being said, we do not Source: Deutsche Bank envision much immediate impact on sales and earnings. To elaborate, Audi sold 487k units of cars in China in 10M16 according to the brand while more Key data than 90% of the sales volume was contributed by the FAW Audi JV’s local FYE 12/31 2015A 2016E 2017E production (for A3, A4L, A6L, Q3 and Q5). In other words, it appears that what Sales (CNYm) 664,850 716,418 774,761 SAIC can import or produce in future would mostly be not-so-mainstream Net Profit 29,793.8 31,889.7 34,778.2 models and the volume contribution is likely to be tiny vs. 1.6m units of SAIC (CNYm) Volkswagen sales in 10M16. DB EPS (CNY) 2.48 2.89 3.15 PER (x) 8.6 8.3 7.6 To conclude, we uphold our Buy recommendation on SAIC Motor as we Yield (net) (%) 6.4 6.0 6.6 believe that the company can generate stable earnings from its major JVs, Source: Deutsche Bank while its local brand production should thrive with the recently successful new model launches (e.g. Roewe RX5 SUV). All of these should translate into consistently high dividend payout. Key downside risk to our forecast is weaker- than-expected new model demand. ________________________________________________________________________________________________________________ Deutsche Bank AG/Hong Kong Distributed on: 14/11/2016 04:54:34 GMT The views expressed above accurately reflect the personal views of the authors about the subject companies and its(their) securities. The authors have not and will not receive any compensation for providing a specific recommendation or view. Deutsche Bank does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. FOR OTHER IMPORTANT DISCLOSURES PLEASE VISIT http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=600104.SS MCI (P) 057/04/2016. .
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